Introduction: Fiscal Federalism – A Review of Developments in the Literature and Policy
Edited by Ehtisham Ahmad and Giorgio Brosio
Ehtisham Ahmad and Giorgio Brosio Motivation This Handbook addresses fiscal relations between different levels of government under the general rubric of ‘fiscal federalism’. While the study of federal systems is an important part of the volume, it also covers other forms of intergovernmental relations. This ranges from unitary states, regional systems, to more decentralized operations, including community-level organizations, and federal systems through to supranational constructs (such as the European Union: EU). The volume seeks to provide a review of the latest literature on the broad subject of fiscal federalism, and also to guide practitioners and policy makers seeking informed policy options. In the case of intergovernmental relations, the recent evolution of theory has been rapid and substantial. The traditional, largely normative, approach was based on the assumption of a benevolent government. Much of the recent literature drops this assumption and takes governments and politicians and officials as self-interested players. Thus, the normative approach has largely given way to a political economy approach. The latter emphasizes the importance of institutional arrangements, including the legal, political and administrative aspects, and information flows to ensure that there are appropriate incentives and sanctions to generate good governance. The volume, thus, has a combination of analytical and policy-oriented contributions. The diffusion of federal or decentralized arrangements across the world, including changes in supranational arrangements, has been equally rapid. There have been reactions to excessive centralization in some unitary states, such as Indonesia, that have led to demands for greater responsibilities or resources for regional or...